GE Money to pay $1.5m for misleading credit card customers

Miriam Steffens

GE Money has been ordered by the Federal Court to pay a $1.5 million fine over making "false and misleading" representations to more than 700,000 credit card customers.

The Australian Securities and Investments Commission initiated legal proceedings late last year, saying the firm had told customers that in order to activate their cards, or apply for an increased credit limit, they would have to consent to getting unsolicited invitations for future credit limit increases.

That was misleading as such consent was unnecessary to activate the cards, the court found this week,

GE Money's move, which occured between January and May 2012, was aimed at circumventing new consumer protection rules that came into effect in July 2012, requiring credit providers to get express consent from cardholders before sending out such invitations.

According to Justice Peter Jacobson, the company had made "an attempt to obtain consents in an unlawful manner," and taken a "cynical approach by seeking to make the cardholders' choices less straightforward."

"This was a systematic and deliberate attempt to mislead cardholders into giving their consent to receive invitations for future credit increases so as to avoid losses of up to $6 million which were projected to be suffered by GE Capital as a result of the tightening regulatory environment," the court found.

"And it was a strategy which was pursued notwithstanding the concerns expressed by responsible senior employees."

GE Capital issues 14 different brands of credit cards, including the Myer and Coles credit cards and the GE Money MasterCard, holding a market share of about 7.7 per cent in the Australian credit card market.

Apart from the $1.5 million penalty, the firm has also been ordered to pay ASIC $50,000 for its legal costs and send emails and letters to the affected cardholders telling them about the court's decision.